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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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Buyside Digest is not affiliated with, and does not endorse, Diamond Hill Small-Mid Cap Strategy. This analysis is provided for institutional research purposes only and is not investment advice.
"Diamond Hill's Small-Mid Cap Strategy underperformed in Q2 2026 as AI momentum dominated, but the manager used volatility to upgrade portfolio quality. Health care, particularly managed care, was the standout performer with strong positioning in Humana and new addition Centene."
Diamond Hill's Small-Mid Cap Strategy returned 9.73% net in Q2 2026, underperforming the Russell 2500 Index's 20.26% gain as AI-related momentum continued to dominate. Stock selection and an underweight to information technology remained the primary headwind, with a small group of AI infrastructure beneficiaries producing outsized returns. The manager participated through holdings like Ciena and industrial businesses benefiting from data center demand but maintained limited exposure to highest-valued semiconductor and memory companies. Health care was the largest positive contributor, driven by managed care positions including Humana and new addition Centene, where the manager sees a realistic path to margin recovery as reimbursement rates catch up with cost trends. The portfolio underwent active repositioning during the quarter, with elevated volatility creating opportunities to upgrade quality through new investments in data-focused businesses like Equifax, Veralto, and Verisk Analytics while exiting positions facing AI-driven headwinds like Wix.com. The manager continues emphasizing higher-quality businesses and believes the portfolio is well positioned to navigate elevated valuations and market concentration while remaining flexible to capitalize on opportunities.
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